Innovation: When Is It ‘Testing’, And When Is It Something More?
In the past couple years we’ve taken to studying the topic of innovation in retail. We knew going in it would be difficult to drill down into how retailers approach a concept so abstract – after all, if something isn’t helping to create new value or make existing processes more efficient (aka: if it isn’t innovative) – why bother?
But what we’ve found in the past few reports has actually been more telling than we expected. There are major differences in how a retailer’s size, performance level, and overall culture affect how it views innovation, overall.
For example, in this year’s report, 61% of Winners say they focus their brainstorming sessions on particular areas of the business based on an overall objective (only 36% of average and lagging retailers do this). By way of comparison, underperformers are FAR more likely to utilize free thinking when brainstorming new ideas (only 39% of Winners report using this method, compared to 64% of average and underperformers). And the barriers to leveraging them become all that more interesting, as well.
The smaller a retailer is, the more likely it is to report that testing is not a project: instead, it is part and parcel to their overall differentiation strategy. When we think back to many of the new retailers in recent times who have successfully disrupted traditional industries (e.g. Warby Parker with eyeglasses, TireRack with auto parts, Dollar Shave Club with personal care items), the idea of bringing innovation (and price reductions) to staid and unsexy buying experiences is no doubt fueling many a late night ideation session among small and aspirational startups. When the business idea is literally borne of the questions, “What retail experience could we completely overhaul and make easier/more fun/more intuitive and less expensive?” the ensuing culture will be perennially steeped in a background of innovation.
However, that ethos appears difficult to maintain. Even for the brands we mentioned, size and the influx of outside money bring seemingly less ability to keep the innovation engine constantly firing. Even Apple, the brand most associated with the word “innovation” in countless consumer polls, has stalled in recent years. In fact, many users (present company included) are making do with the iPhones, iPads and laptops that they have, as new versions don’t offer enough net new features to warrant the upgrade. The more revenue a retailer takes in, the more likely they are to fiddle with ideas in their own lab setting, employ focus groups to see what would “play” well in the market, and then gradually roll out pilot programs.
The most transformative ideas will continue to come from those that genuinely don’t know whether the market will embrace them or not (and have fewer shareholders to please), but have to be acted upon due to their inventor’s passion and curiosity.